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Adam Smith on the natural ordering Tendency of Free Markets, or what he called the “Invisible Hand” (1776)

This passage comes from Adam Smith, An Inquiry into the Nature and Causes of the the Wealth of Nations and is perhaps one of his most famous quotations (1776):

… by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the publick good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

About this Quotation:

Liberty Fund is pleased to publish in paperback and online the Glasgow Edition of the Works and Correspondence of Adam Smith, in 7 volumes, which was commissioned by the University of Glasgow and originally published by Oxford University Press in 1976 in order to commemorate the 200th anniversary of the first publication of Smith’s The Wealth of Nations (1776).

The concept of the “invisible hand” is one of Smith’s most potent concepts and is consequently one of his most famous statements. With his complete works online it is possible to do a “key word” search for this phrase across his entire corpus. It is surprising to see where else it crops up in his writings.

This phrase about the “invisible hand”, along with Adam Ferguson’s that societies were “the result of human action, but not the execution of any human design,” are two of the most important and profound insights to emerge out of the Scottish Enlightenment.

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